(k) Provisions and Contingencies Provisions
A provision is recognised when the Company has a present obligation (legal or constructive) as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.The amount recognised as provision are determined based on best estimate of the amount required to settle the obligation at the balance sheet date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
A provision for onerous contracts is recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognizes any impairment loss on the assets associated with that contract.
Contingent Liabilities & Contingent Assets
A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases, where there is a liability that cannot be recognised because it cannot be measured reliably. The Company does not recognize a contingent liability but discloses its existence in the financial statements.
Contingent assets are not recognized in the financial statements. If the inflow of economic benefits is probable, then it is disclosed in the financial statements.
Provisions, contingent liabilities, contingent assets and commitments are reviewed at each balance sheet date.
(l) Employee Benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled.
(ii) Other long-term employee benefit obligations
The liabilities for compensated absences that are not expected to be settled wholly within 12 months are measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in the Statement of Profit and Loss.
The obligations are presented as current liabilities in the balance sheet if the entity does not have any unconditional right to defer settlement for at least 12 months after the end of the reporting period, regardless of when the actual settlement is expected to occur.
(iii) Post-employment obligations
The Company operates the following post-employment schemes:
(a) defined benefit plans such as gratuity and
(b) defined contribution plans such as superannuation scheme, provident fund.
Gratuity Obligations
The liability or asset recognised in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.
The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the Statement of Profit and Loss.
Remeasurement gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income.
Defined Contribution plans
Defined Contribution Plans such as superannuation scheme, provident fund are charged to the statement of profit and loss as an expense, when an employee renders the related services. If the contribution payable to scheme for service received before the balance sheet date exceeds the contribution already paid, the deficit payable to the scheme is recognised as liability after deducting the contribution already paid. If the contribution already paid exceeds the contribution due for services received before the balance sheet date, then excess is recognised as an asset.
(m) Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operational decision maker monitors the operating results of its business Segments separately for the purpose of making decision about the resources allocation and performance assessment. Segment performance is evaluated based on the profit or loss and is measured consistently with profit or loss in the financial statements. The operating segments have been identified on the basis of the nature of products/ services.
(n) Cash and Cash Equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, demand deposits with banks, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
(o) Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
(p) Earnings Per Share Basic earnings per share
Basic earnings per share are calculated by dividing:
• the profit attributable to owners of the Company.
• by the weighted average number of equity shares outstanding during the financial year.
Diluted earnings per share
Diluted earnings per share adjust the figures used in the determination of basic earnings per share to take into account:
• the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and
• the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.
(q) Non-current assets held for sale
The Company classifies non-current assets as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use. Such non-current assets classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Any expected loss is recognised immediately in the Statement of Profit and Loss.
The criteria for “held for sale” classification is regarded as met only when the sale is highly probable i.e. an active program to locate a buyer to complete the plan has been initiated and the asset is available for immediate sale in its present condition and the assets must have actively marketed for sale at a price that is reasonable in relation to its current fair value. Actions required to complete the sale should indicate that it is unlikely that significant changes to that plan to sale these assets will be made. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Property, plant and equipment and intangible assets once classified as held for sale are not depreciated or amortised. Assets and liabilities classified as held for sale are presented separately as current items in the balance sheet.
(r) Dividend distribution to equity shareholders
Dividend distributed to Equity shareholders is recognised as distribution to owners of capital in the Statement of Changes in Equity, in the period in which it is paid.
Final dividend on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the Company's Board of Directors.
(s) Foreign currencies
The financial statements are presented in Indian rupee (Rs.), which is Company's functional and presentation currency.
Transactions in foreign currencies are recognised at the prevailing exchange rates on the transaction dates. Realised gains and losses on settlement of foreign currency transactions are recognised in the statement of profit and loss.
Monetary foreign currency assets and liabilities at the year-end are translated at the year-end exchange rates and the resultant exchange differences are recognised in the statement of profit and loss.
(t) Revenue Recognition
The Company mainly deals in manufacture of special alloy steel/ stainless steel, billets, bars, rods, wire rods, EOT cranes, material handling equipment, other industrial machinery, rendering of comprehensive engineering services and construction/engineering services.
Revenue is recognized on satisfaction of performance obligation upon transfer of control of promised goods or services to customers in an amount that reflects the consideration which Company expects to receive in exchange for those products or services.
Revenue is measured based on the transaction price, which is the consideration, adjusted for volume discounts, rebates, scheme allowances, price concessions, incentives, and returns, if any, as specified in the contracts with the customers. Revenue excludes taxes collected from customers on behalf of the government.
Revenue from sale of products and services is recognised at a time when the performance obligation is satisfied except Revenue from Engineering Contracts where in revenue is recognized over the time from the financial year in which the agreement to sell (containing salient terms of agreement to sell) is executed. The period over which revenue is recognised is based on entity's right to payment for performance completed.
In determining whether Company has right to payment, the Company shall consider whether it would have an enforceable right to demand or retain payment for performance completed to date if the contract were to be terminated before completion for reasons other than Company's failure to perform as per the terms of the contract.
The revenue recognition of Engineering Contracts under progress requires forecasts to be made of total budgeted costs with the outcomes of underlying contracts, which further require assessments and judgements to be made on changes in scope of work and other payments to the extent they are probable and they are capable of being reliably measured. However, where the total project cost is estimated to exceed total revenues from the project, the loss is recognized immediately in the Statement of Profit and Loss.
Revenue from Engineering Contracts where the performance obligations are satisfied over time and where there is no uncertainty as to measurement or collectability of consideration, is recognized as per the percentage of completion method. When there is uncertainty as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is resolved. Revenues in excess of invoicing are classified as contract assets (which is referred to as unbilled revenue) while invoicing in excess of revenues are classified as contract liabilities (which is referred to as unearned revenues). The billing schedules agreed with customers include periodic performance based payments and / or milestone based progress payments. Invoices are payable within contractually agreed credit period.
Engineering Contracts are subject to modification to account for changes in contract specification and requirements. The Company reviews modification to contract in conjunction with the original contract, basis which the transaction price could be allocated to a new performance obligation or transaction price of an existing obligation could undergo a change. In the event, transaction price is revised for existing obligation, a cumulative adjustment is accounted for.
The Company satisfies a performance obligation and recognises revenue over time, if one of the following criteria is met:
1. The customer simultaneously receives and consumes the benefits provided by the Company's performance as the Company performs; or
2. The Company's performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
3. The Company's performance does not create an asset with an alternative use to the Company and Company has an enforceable right to payment for performance completed to date.
In case of performance obligations, where any of the above conditions is not met, revenue is recognised at the point in time at which the performance obligation is satisfied.
Export incentives
Export Incentives under various schemes are accounted in the year of export.
Interest Income
Interest income accrues on a time proportion basis, by reference to the principal outstanding and the effective interest rate applicable.
Dividend Income
Dividend income from investments is recognised when the shareholder's right to receive the payment has been established.
(u) Exceptional Items
Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Company. These are material items of income or expense that have to be shown separately due to the significance of their nature or amount.
(v) Events after the reporting period
Adjusting events are events that provide further evidence of conditions that existed at the end of the reporting period. The financial statements are adjusted for such events before authorisation for issue.
Non-adjusting events are events that are indicative of conditions that arose after the end of the reporting period. Nonadjusting events after the reporting date are not accounted but disclosed.
(w) Significant accounting estimates, judgements and assumptions
The preparation of the Company's financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances existing when the financial statements were prepared. The estimates and underlying assumptions are reviewed on an ongoing basis. Revision to accounting estimates is recognised in the year in which the estimates are revised and in any future year affected.
In the process of applying the Company's accounting policies, management has made the following judgements which have significant effect on the amounts recognised in the financial statements:
i. Useful lives of property, plant and equipment
Determination of the estimated useful life of tangible assets and the assessment as to which components of the cost may be capitalised. Useful life of tangible assets is based on the life specified in Schedule II of the Act and also as per management estimate for certain category of assets. Assumption also needs to be made, when Company assesses, whether an asset may be capitalised and which components of the cost of the assets may be capitalised.
ii. Use of significant judgements in revenue recognition
• The Company's contracts with customers could include promises to transfer multiple products and services to a customer. The Company assesses the products / services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligation involves judgement to determine the deliverables and the ability of the customer to benefit independently from such deliverables.
• The Company exercises judgement in determining whether the performance obligation is satisfied at a point in time or over a period of time. The Company considers indicators such as how customer consumes benefits as services are rendered or who controls the asset as it is being created or existence of enforceable right to payment for performance to date and alternate use of such product or service, transfer of significant risks and rewards to the customer, acceptance of delivery by the customer, etc.
• Judgement is also required to determine the transaction price for the contract. The transaction price could be either a fixed amount of customer consideration or variable consideration with elements such as volume discounts, service level credits, performance bonuses, price concessions and incentives. The transaction price is also adjusted for the effects of the time value of money if the contract includes a significant financing component. Any consideration payable to the customer is adjusted to the transaction price, unless it is a payment for a distinct product or service from the customer.
• Revenue from Engineering Contracts is recognised using percentage-of-completion method. The Company uses judgement to estimate the future cost-to-completion of the contracts which is used to determine the degree of completion of the performance obligation.
iii. Fair value measurement of financial instruments
When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be measured based on quoted prices in active markets, their fair value is measured using appropriate valuation techniques. The inputs for these valuations are taken from observable sources where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. Judgements include considerations of various inputs including liquidity risk, credit risk, volatility etc. Changes in assumptions/ judgements about these factors could affect the reported fair value of financial instruments.
iv. Defined benefit plan
The cost of the defined benefit gratuity plan and other post-employment benefits and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
v. Allowances for uncollected accounts receivables
Trade receivables are stated at their normal value as reduced by appropriate allowances for estimated irrecoverable amounts. Individual trade receivables are written off when management deems them not collectable. Impairment is made on the expected credit loss model, which are the present value of the cash shortfall over the expected life of the financial assets. The impairment provisions for financial assets are based on assumption about the risk of default and expected loss rates. Judgement in making these assumptions and selecting the inputs to the impairment calculation are based on past history, existing market condition as well as forward looking estimates at the end of each reporting period.
vi. Allowance for inventories
Management reviews the inventory age listing on a periodic basis. This review involves comparison of the carrying value of the aged inventory items with the respective net realizable value. The purpose is to ascertain whether an allowance is required to be made in the financial statements for any obsolete and slow-moving items. Management satisfies itself that adequate allowance for obsolete and slow-moving inventories has been made in the financial statements.
vii. Impairment of non-financial assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, the Company estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or Cash Generating Units (CGU's) fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or a group of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account, if no such transactions can be identified, an appropriate valuation model is used.
viii. Contingencies
Management judgement is required for estimating the possible outflow of resources, if any, in respect of contingencies/ claim/ litigation against Company as it is not possible to predict the outcome of pending matters with accuracy.
ix. Leases
The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Company has several lease contracts that include extension and termination options. The Company applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customisation to the leased asset).
x. Provision for income tax and deferred tax assets
The Company's tax jurisdiction is India. Significant judgements are involved in estimating budgeted profits for the purpose of paying advance tax, determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions. A deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised. Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits together with future tax planning strategies. Accordingly, the Company exercises its judgement to reassess the carrying amount of deferred tax assets at the end of each reporting period.
(x) Recent Indian Accounting Standards (Ind AS) issued not yet effective
Ministry of Corporate Affairs (“MCA”) notifies new standards or amendments to the existing standards under Companies (Indian Accounting Standards) Rules as issued from time to time. For the year ended March 31, 2024, MCA has not notified any new standards or amendments to the existing standards applicable to the Company.
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II) Other Notes
(i) Property, plant and equipment are free from any encumbrances.
(ii) Refer Note No. 37(b) for disclosure of contractual commitments for the acquisition of property, plant and equipment.
(iii) Gross Block of Buildings as at March 31, 2024 includes value of offices, residential flats and garages in co-operative societies/proposed co-operative societies/association of apartment owners aggregating Rs. 2.50 crore at cost (March 31,2023 - Rs. 2.50 crore) [including cost of shares in co-operative societies Rs.500 /- (March 31, 2023- Rs.500/-)].
(iv) Property Plant & Equipment include borrowing costs of Rs. 2.07 crore capitalised during the year (March 31, 2023 Rs. 0.74 crore), rate of capitalisation 8.75% (Previous Year 8.76%).
(v) Capital work in progress comprises of Property, Plant & Equipment under construction and pre-operative expenses & interest pending allocation.
(vi) The Company has not revalued any of its property, plant and equipment including right of use assets or intangible assets.
(vii) The Company does not hold any Benami Property and does not have any proceedings initiated or pending for holding benami property under the Benami Transactions (Prohibitions) Act, 1988 and the rules made thereunder.
(viii) All immovable properties are held in the name of the Company.
Notes:
(a) (i) The Company has opted to measure its non-current investments in equity shares in Subsidiary Companies at Fair value through Other Comprehensive Income (FVTOCI) while investments held in Joint Ventures are measured at Fair value through Profit or Loss (FVTPL).
(ii) Accordingly, other income and OCI for the year includes Rs.0.42 crore (net gain) and Rs. 4.61 crore (net loss) (2022-23 - Rs. 18.57 crore (net gain) and Rs. 7.22 crore (net gain)) respectively towards change in fair value of noncurrent investments.
(iii) In the previous year, the demerger of cold finished alloy steel bars and wires business from Mukand Sumi Metal Processing Ltd. (MSMPL) to Mukand Sumi Special Steel Ltd. (MSSSL) has been approved by National Company Law Tribunal (NCLT), Mumbai Bench vide its order dated June 30,2022. In accordance with the share exchange ratio approved under the Scheme, Company received 25,71,150 shares of MSSSL . After demerger, MSMPL continues to carry on the business of cold finished stainless steel bars and wires. Moreover, in terms of arrangement with Joint Venture partner-Sumitomo Corporation, Japan (SC), Company has purchased 1,33,77,000 shares of MSMPL from SC at a consideration of Rs.53.11 Crore and MSMPL has become a Wholly Owned Subsidiary of the Company with effect from 30th September 2022.
(iv) The Board at its meeting held on November 11,2022 approved the sale 25,71,150 equity shares (5.51%) of Rs.10 each of MSSSL (received during the previous year pursuant to Scheme of Demerger), to promoter group company(ies) at value not less than Rs. 574/- per share. During the year, the Company on May 02,2023 sold said shares to Jamnalal Sons Private Limited at Rs 574/- per share
b. Terms / rights attached to equity shares:
The Company has only one class of equity share having a par value of Rs. 10/- per share. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividend in Indian rupees in accordance with its dividend distribution policy.
The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. The Board of Directors in its meeting held on May 15, 2024 recommended a dividend on equity shares at Rs.2 per share for financial year 2023-24
During the year ended 31 March 2024, the amount of dividend per share recognized as distribution to equity shareholders was Rs. 2 per share as recommended by the Board of Directors in its meeting held on May 16, 2023 and approved by the Shareholders at its meeting held on August 11, 2023.
The Dividend paid for the previous year and proposed for the current year is in compliance with Section 123 of the Act.
In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.
c. The Company does not have any holding company.
d. There are no bonus shares issued nor any shares bought back during the period of five years immediately preceding the reporting date. In the Previous year Shares were allotted for consideration other than cash under the Scheme of Amalgamation.
(36) CAPITAL MANAGEMENT
The primary objective of the Company's capital management is to ensure that it maintains an efficient capital structure and maximize shareholder value.
The Company manages its capital structure and makes adjustments in light of changes in economic conditions, annual operating plans,long term and other strategic investment plans. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders or issue new shares. No changes were made in the objectives, policies or processes for managing capital during the year ended March 31, 2024 and March 31, 2023.
The Company monitors capital using a ratio of 'adjusted net debt' to 'equity'. For this purpose, adjusted net debt is defined as total liabilities, comprising interest-bearing loans and borrowings less cash and cash equivalents & Current Investments. Equity comprises all components of equity including share premium and all other equity reserves attributable to the equity share holders.
(39) RELATED PARTY DISCLOSURES (a) Relationship :
(i) Subsidiaries:
Mukand Sumi Metal Processing Ltd. (MSMPL) (WOS wef 30.09.2022), Mukand Heavy Engineering Ltd (MHEL) (wef 15.12.2023), Mukand International FZE (MIFZE)
(ii) Associates:
Bombay Forgings Ltd. (BFL), Stainless India Ltd (SIL) upto 07.12.2023
(iii) Joint Ventures:
Hospet Steels Ltd. (HSL), Mukand Sumi Metal Processing Ltd. (MSMPL) JV till 29.09.2022
(iv) Key Management Personnel:
Niraj Bajaj, Prakash Vasantlal Mehta , Sankaran Radhakrishnan , Bharti Ram Gandhi, Amit Yadav, Arvind M Kulkarni, Nirav Bajaj & Other KMPs, Relatives of a Director/ Other KMPs.
(v) Other related parties where significant influence exists or where the related party has significant influence on the Company:
Kalyani Mukand Ltd., Jamnalal Sons Pvt. Ltd. (JSPL) , Baroda Industries Pvt. Ltd.,
Sidya Investment Ltd, Bachhraj & Company Pvt. Ltd ,Bachhraj Factories Pvt. Ltd, Mukand Sumi Special Steel Ltd,Bajaj Sevashram Pvt. Ltd, Kamalnayan Investment & Trading Pvt Ltd ,Rahul Securities Pvt. Ltd, Niraj Holding Pvt. Ltd. Madhur Securities Pvt. Ltd, Shekhar Holding Pvt. Ltd, Malvi Ranchoddas & Co., Bajaj Allianz General Insurance Co Ltd. Hind Musafir Agency Ltd, Bajaj Finserv Limited,Hindustan Housing Co. Ltd,Other Promoter group ( refer note 16).
(vi) The Company holds more than 20% in T P Samaksh Limited . However, the Company does not exercise significant influence or control on decisions of the investees. Hence, they are not being construed as associate companies. These investments are included in “Note 3A: Investments” under Investment measured at fair value through Profit & Loss account in the financial statements.
(42) EMPLOYEE BENEFITS
Defined contribution plans
The Company also contributes on a defined contribution basis to employees' provident fund and superannuation fund. Contributions are made to provident fund in India for employees at the rate of 12% of basic salary as per regulations. The contributions are made to registered provident fund (an exempted Trust). The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation.
Defined benefit plans Compensated Leave
The leave obligations cover the Company's liability for earned leave and sick leave. The compensated absences charged in the Statement of Profit and Loss for the year ended March 31, 2024 based on actuarial valuation is Rs. 0.03 Crore (previous year Rs. 0.30 crore)
Gratuity
The Company provides for gratuity for employees as per Company's Scheme/s. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is based on the employees last drawn basic salary, special allowance and dearness allowance per month and as per the Schemes applicable to those employees from time to time. The gratuity plan is a funded plan. The scheme is funded with Life Insurance Corporation in the form of a qualifying insurance policy.
Notes:
a) The rate used to discount post employment benefit obligations is determined by reference to market yields at the end of the reporting period on government bonds.
b) The estimates of future salary increases considered in the actuarial valuation take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
c) The gratuity fund is managed by Life Insurance Corporation of India and details of fund invested by insurer are not available with Company.
d) The Company expects to make a contribution of Rs. 6.00 Crore to the defined benefit plans (gratuity - funded) during the next financial year.
e) The average duration of the defined benefit plan obligation at the end of the reporting period is 6 years.
Risk exposure
Valuations are performed on certain basic set of pre-determined assumptions and other regulatory frame work which may vary over time. Thus, the Company is exposed to various risks in providing the above gratuity benefit which are as follows:
Interest Rate risk: The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability (as shown in financial statements).
Liquidity Risk: This is the risk that the Company is not able to meet the short-term gratuity payouts. This may arise due to non-availability of enough cash / cash equivalent to meet the liabilities or holding of illiquid assets not being sold in time.
Salary Escalation Risk: The present value of the defined benefit plan is calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value of obligation will have a bearing on the plan's liability.
Demographic Risk: The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumptions.
Regulatory Risk: Gratuity benefit is paid in accordance with the requirements of the Payment of Gratuity Act,1972 (as amended from time to time) and Company's Schemes for different category of employees. There is a risk of change in regulations requiring higher gratuity payouts.
Asset Liability Mismatching or Market Risk: The duration of the liability is longer compared to duration of assets, exposing the Company to the market risk for volatilities/fall in interest rate.
Investment Risk: The probability or likelihood of occurrence of losses relative to the expected return on any particular investment.
(46) Financial Risk Management
“The process of identification and evaluation of various risks inherent in the business environment and the operations of the Company and initiation of appropriate measures for prevention and/or mitigation of the same are dealt with by the concerned operational heads under the overall supervision of the Managing Director of the Company. The Audit Committee periodically reviews the adequacy and efficacy of the overall risk management system. The Company's financial risk management is an integral part of how to plan and execute its business strategies. The Company has in place adequate Internal Financial Controls with reference to financial statements and such internal financial controls are operating effectively. The Company has adopted policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company's policies, the safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial statements.
The Company has exposure to the following risks arising from financial instruments:
• Credit risk
• Liquidity risk and
• Market risk
A Credit risk
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company's trade and other receivables. The carrying amounts of financial assets represent the maximum credit risk exposure.
i Trade and Other receivables
The Company is recording the allowance for expected credit losses for all financial assets not held at FVTPL, together with loan commitments and financial guarantee contracts, (in this section all referred to as 'financial instruments'). Equity instruments are not subject to impairment under IND AS 109.
The ECL allowance is based on:
a) 12 months' expected credit loss (12mECL) where there is no significant increase in credit risk since origination and;
b) on the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or LTECL).
The 12mECL is the portion of LTECL that represents the ECL that results from default events on a financial instrument that are possible within the 12 months after the reporting date.Both LTECL and 12mECL are calculated on individual and collective basis, depending on the nature of the underlying financial assets. The Company has established a policy to perform an assessment, at the end of each reporting period, of whether a financial instrument's credit risk has increased significantly since initial recognition.
Based on the above process, the Company groups its Financial assets into Stage 1, Stage 2, Stage 3, as described below:
Stage 1 : When financial assets are first recognised, the Company recognises an allowance based on 12mECL. Stage 1 loans also include facilities where the credit risk has improved and the loan has been reclassified from Stage 2 or Stage 3.
Stage 2: When a financial assets has shown a significant increase in credit risk since origination, the company records an allowance for the LTECL. Stage 2 financial assets, where the credit risk has improved and the loan has been reclassified from Stage 3.
Stage 3: Loans considered credit-impaired. The Company records an allowance for the LTECL.
iii Cash and bank balances
The Company held cash and cash equivalent and other bank balance of Rs. 51.44 crores at March 31, 2024 (March 31,2023: Rs 38.96 crores). The same are held with banks having good credit rating.
B Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. Management monitors rolling forecasts of the Company's liquidity position and cash and cash equivalents on the basis of expected cash flows.
I Maturities of financial liabilities
A The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted.
C Market risk
Market risk is the risk that changes in market prices, such as interest rates (interest rate risk), will affect the company's income. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
Interest rate risk
Interest rate risk is the risk that the fair value or future cashflows of a financial instrument will fluctuate because of changes in market interest rates. The Company's exposure to the risk of changes in market interest rates relates primarily to the Company's long term debt obligation at floating interest rates. The company's fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
(a) Interest rate risk exposure
The exposure of the Company's borrowing to interest rate changes at the end of the reporting period are as follows:
Foreign Exchange Risk
Foreign exchange risk arises on future commercial transcations and on all recognised monetary assets and liabilities, which are denominated in a currency other than the functional currency of the Company. The Company's management has set a policy wherein exposure is identified, a benchmark is set and monitored closely and accordingly suitable hedges are taken. The Company's foreign currency exposure arises mainly from foreign exchange imports and exports primarily with respect to USD and EURO. Additionally, there are transaction which are entered into in other currencies are not significant in relation to total volume of the foreign currency exposures.
(49) ACCOUNTING FOR THE SCHEME OF AMALGAMATION
On 8th February, 2024, the Board of Directors of the Company had considered and approved a Scheme of Arrangement (“Scheme”) for transfer of the Stainless Steel Cold Finished Bars and Wires Business from Mukand Sumi Metal Processing Limited (“MSMPL”), a wholly-owned subsidiary to the Company by way of demerger (“Demerger”). Since, MSMPL is WOS of the Company, no additional shares shall be issued pursuant to the Demerger.
The Company jointly with MSMPL had filed the Scheme before the National Company Law Tribunal, Mumbai Bench (“Hon'ble NCLT”). In compliance with the NCLT Order, notices have been issued to various Regulatory Authorities. The Scheme shall be subject to sanctions and/or approvals, inter alia, by Regulatory Authorities and Hon'ble NCLT. Pending approval of the Scheme, no effect of the Demerger has been considered in the current financial statements
(50) Previous year's figures have been regrouped/recast wherever necessary.
As per our attached report of even date For and on behalf of the Board of Directors
For DHC & Co.
Chartered Accountants NiraJ BaJaJ R Sankaran
ICAI FR No 103525W Chairman & Managing Director Director
DIN : 00028261 DIN : 00381139
Pradhan Dass
Partner Dhanesh K Goradia Rajendra Sawant
Membership No. 219962 Chief Financial Officer Company Secretary
Bengaluru, May 15, 2024 Mumbai, May 15, 2024
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